White House Proposes E-filing for Nonprofits’ IRS Reports

Language included in the budget proposal released by the White House this week offers promise for those who follow the politically active nonprofit organizations that we call “shadow money” groups: new e-filing requirements that would do away with the complicated procedures that now impede access to tax documents the groups file every year. Instead, the groups would file their documents electronically, and the IRS would create a searchable database that would be available to the public.

The reform is aimed at the Form 990s that all nonprofits must submit annually. The documents are public in the eyes of the law, but they are not easy to obtain in practice, as we explained to the Advisory Committee on Transparency in January.

Currently there is no public, searchable database — such as the one the IRS already maintains for 527 organizations — for nonprofit organizations. Instead, citizens and watchdogs interested in obtaining the groups’ filings must go through time-consuming and sometimes costly procedures. For example, the nonprofits themselves are required to provide their 990s to members of the public upon request, but some shadow money groups are so shadowy that it’s hard to find a staff member who can fill the request. Organizations will sometimes delay turning over the documents as long as they can without breaking the law. And groups often say it’s their “policy” to only provide hard copies by mail, rather than email them, and are allowed to charge a fee for printing and postage.

Trying to get the documents from the IRS is not much easier. The agency requires anyone looking for a single group’s filing to print out and complete a Form 4501-A and fax or mail it to the agency. Then the IRS has up to 60 days to provide the form — by sending a hard copy in the mail. There is no way to receive a PDF copy, nor is it possible to send a request electronically.

Any larger attempt to analyze nonprofits’ filings, however — such as the Center for Responsive Politics’ Shadow Money Trail project — necessitates being able to sift through large numbers of filings. And for that kind of access, the IRS requires that an individual or organization pay thousands of dollars a year to receive DVDs in the mail every month. (Yes, DVDs, in the mail.) The DVDs contain scanned PDF copies of all the filings made in a month — several earlier. The delay is due to the time it takes to scan the documents, burn the DVDs, and mail them out after the filings arrive at the IRS.

The language in the White House’s budget proposal is a major step in the direction of transparency, addressing many of the needless hurdles discussed above. Not only would it create an online database of filings that currently are available only to those willing to perform the bureaucratic gymnastics the system demands, but it would require the IRS to make the data included in the filing available in a form that could be downloaded and processed relatively easily by groups like CRP. (We have been, and still are, manually inputting these thousands of records.)

Other minor improvements could be included if Congress chooses to take this on, as we hope it does. First of all, the new requirements could include Form 1024 filings, which are filed by organizations seeking tax-exempt status from the IRS and contain important information about an organization’s intended activities. Those forms become public once exempt status is granted.

Of course, the language does nothing to fix the fact that politically active nonprofits don’t have to disclose the names of their donors, flouting one of the bedrock principles of the campaign finance system.

Despite its shortcomings, however, the proposal by the White House is a common sense fix to a needlessly complicated system. In the second decade of the 21st century, documents that are public should be readily available online, and the data they contain should be provided in a form that can be processed. The IRS has been doing this with data on 527 organizations for years, so the capacity is there. Given the ever-growing influence of politically active nonprofits in elections, now is the time to make a change in how the IRS provides this crucial information to the public.

Robert joined the Center in August 2011 as the outside spending and PACs researcher. In 2012, he started CRP's Politically Active Nonprofits project, which tracks the financial networks of "dark money" groups, mainly 501(c)(4) and 501(c)(6) organizations. In 2014, he won, with colleague Viveca Novak, the Society of Professional Journalists' Sigma Delta Chi Award for Public Service in Online Journalism for a series of stories published on OpenSecrets Blog. Robert has a masters in U.S. foreign policy from American University. Before coming to Washington, D.C., he lived, studied and worked for several years in France and Taiwan, traveling extensively in Europe and Asia. He is originally from Charleston, SC.

Media Contact

Viveca Novak
(202) 354-0111
press@crp.org

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